The ECB has announced the initiation of the preparation phase for a potential digital euro, following the conclusion of a two-year investigation into its design and distribution.

The investigation phase, which commenced in October 2021, aimed to identify feasible design and distribution mechanisms for the digital currency. According to a report released by the ECB, the envisioned digital euro will be easily accessible to the public and businesses and will be distributed via supervised intermediaries, such as banks. The ECB intends the digital euro to act as a virtual form of cash for all digital transactions within the euro area. Notably, no current digital payment instrument encapsulates all these features.

Christine Lagarde, President of the ECB, emphasized the significance of preparing the euro for the digital age, saying, “We envisage a digital euro as a digital form of cash that can be used for all digital payments, free of charge, and that meets the highest privacy standards. It would coexist alongside physical cash, ensuring inclusivity.”

The preparation phase, scheduled to begin on 1 November 2023, will span two years. It will focus on finalizing the digital euro rulebook, selecting potential platform providers, and conducting rigorous tests to ensure the digital euro aligns with both the Eurosystem's standards and user expectations.

Furthermore, Fabio Panetta, an ECB Executive Board member, highlighted the strategic importance of the initiative, stating, “A digital euro would increase the efficiency of European payments and contribute to Europe’s strategic autonomy.”

However, the ECB clarified that the launch of this phase does not equate to a definitive decision on releasing a digital euro. That determination will be considered post the completion of the European Union's legislative process.

The digital euro's framework will prioritize user privacy, and the Eurosystem will not access users’ personal data or link it to individual transactions. It also promises enhanced resilience, innovation, and competition in the European payments domain.